Homeowners encouraged to opt for 'green mortgages'

04 August 2008 / by Rachael Stiles

Homeowners are being encouraged to opt for a 'green mortgage', whereby they receive a discount on their mortgage in return for implementing energy-saving home improvements.

A recent report from British Gas and IPPR (Institute for Public Policy Research) advocated that energy saving measures should be taken to the streets, brought down to a grass roots level, and that people should be rewarded for their environmentally friendly behaviour.

The report – Green Streets – is the latest call for action from both the government and the public to reduce climate change. One of the suggestions made in the report was offering financial incentives to households, such as encouraging green mortgages.

If the government's 'zero carbon' target for all new homes by 2016 is to be attained, then analysts say that people need to be offered greater incentives – a green mortgage means a lower interest rate when homeowners undertake changes to reduce emissions and improve the energy efficiency of their home.

Green mortgages – or Energy Efficient Mortgages (EEMs) – have been available in America for more than 30 years, but are still rare in the UK. One provider, Ecology Building Society, has been offering its C-Change for Home Improvements mortgage since last year in an attempt to battle climate change.

Ecology's green mortgage allows homeowners to remortgage to the Society, receiving a one per cent reduction in the mortgage rate for any money they spend on making their home greener.

In addition to helping the environment, Ecology says that this can also help to save more money for homeowners by reducing their fuel bills as well as their mortgage payments. This is becoming increasingly important as energy bills rise.

On the British Gas-IPPR report, Paul Ellis, chief executive at Ecology said: "We welcome the green streets initiative and its practical demonstration of what can be achieved."

He continued: "Our C-Change mortgage borrowers are already greening their streets and making a direct contribution to reducing carbon emissions, while benefiting from long-term discounts which don’t rely on switching every couple of years. Ecology mortgages are truly green unlike carbon offset deals which are akin to closing the stable door after the carbon horse has bolted."